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Software as a Service defined: What is SaaS and how can it help your business?

  • September 19, 2016

What is SaaS?

The IT industry is evolving and a primary part of this evolution is the increasing emphasis on software as a service (SaaS) offerings. According to Gartner, the SaaS industry does not point toward signs of decline as its poorest segment is expected to see a compound annual growth rate (CAGR) of 19.7% through 2019.

Software as a service is a software distribution model where a third-party provider owns, distributes, and manages software for their clients. Many businesses are transitioning from owning their software to subscribing to services from outside vendors because of the cost efficiency and flexibility the approach can provide. SaaS is one of the three primary categories of cloud computing. The other common cloud computing service offerings are platform as a service (PaaS) and infrastructure as a service (IaaS). See the sections below to learn more about SaaS and what it can do for your business.

What can SaaS be used for?

SaaS applications can be used for a number of business processes such as email, customer relationship management (CRM), sales, finances, human resources, billing, and more. A few of the most well-known SaaS providers include Microsoft, Intuit, Salesforce, and Oracle.

How are SaaS offerings delivered?

Essentially, SaaS can be defined as a software hosted and delivered by a third-party provider, which users can access over the Internet or via network-based access to a single copy of the application. SaaS offerings are generally supplied directly from the vendor, or from a service aggregator who compiles SaaS applications from numerous vendors into a single offering. The SaaS provider will centrally host the application and its data, remotely deploying patches and upgrades as they become available. The provider’s service level agreement (SLA) will determine whether the company’s data is stored locally, in the cloud, or a combination of the two.

How do you purchase SaaS services?

On-premise software requires a business to purchase a one-time licensing model, which requires a one-time payment from the business, but does not include support and upgrades to the software. However, when a business subscribes to a SaaS application, they pay a recurring fee that covers the software, license, support, and updates. In other words, the on-demand delivery method used by SaaS providers enables businesses to avoid the costs and resources associated with the deployment of a large, on-site infrastructure. Therefore, if a SaaS application proves ineffective, the company can cease its use without losing profit from the money invested in on premise equipment and licenses.

What benefits can SaaS provide to your business?

The primary benefit of SaaS applications is that they transfer the burden of software and hardware licensing, installation, and support from the business to the vendor. SaaS offerings can provide the following advantages for a company.

Reduced infrastructure and ownership costs

SaaS can reduce the costs that accompany traditional on-site deployment of hardware and software. In the past, the process of installing large-scale business-critical software such as a CRM or enterprise resource planning (ERP) applications would require an organization to allocate a major amount of time and money to complete the integration. Upfront licensing costs, IT personnel and consultants, and the time and budget requirements necessary to successfully launch the application would accumulate and pose a significant investment risk to an organization, especially one smaller in size. The SaaS model removes the hassle, risk, and a significant portion of the upfront costs required to deploy the technology, allowing smaller companies to take advantage of the latest software innovations without risking their business.

Flexible subscriptions

Generally, companies pay a flat, monthly fee for a SaaS subscription, which provides the flexibility and scalability necessary for a growing business. The recurring payment model enables businesses to develop a more accurate budget and have more control over their IT expenses. With a SaaS offering, companies have the ability to terminate their subscription without fines or penalties( if a monthly subscription is the only contract in effect), as well as scale their network to suit a fluctuating number of users. Essentially, as a business grows, the value of a SaaS offering increases and the subscriptions can be easily modified to suit the activity of the organization.

Accessibility and automatic updates

One of the most appealing features of a SaaS subscription is its accessibility. Users simply need the Internet and a browser and they can utilize the service anywhere and from any device. In addition, a cloud-hosted application is maintained from one infrastructure instead of on each user’s computer, so updates and patches can be deployed rapidly, thus minimizing downtime for users. Instead of being required to manage the technology, the company can utilize its IT resources for more proactive, innovative tasks.

At Aldridge, our team of experts can help determine if SaaS applications are right for your business. Contact a firm representative or click here to learn more about software as a service technology and the benefits it can provide.

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